He was arrested by the Special Investigation Team (SIT) headed by Inspector General Z H Zaidi on July 12.
The court granted the bail on a personal bond of Rs 1 lakh and two guarantees of Rs 10 lakh each.
Chauhan was granted bail as the CBI failed to file the chargesheet within 90 days, it said.
Zaidi, Deputy Superintendent of Police Manoj Joshi and six other police officers were arrested by the CBI on July 29 and remanded to police custody till September 4 for the death of Suraj in police custody.
He had arrested six people in the case, but one of the accused - Suraj - died in police custody.
The case was handed over to the CBI on direction of the Himachal Pradesh High Court.
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